A federal judge has upheld an arbitrator's decision to award more than $1 million in severance to a Washington County technology executive who was fired in 2003.

Electro Scientific Industries dismissed chief executive James Dooley in 2003 after discovering that he'd eliminated nearly $1 million in retirement liabilities from the company's books. The decision boosted ESI's profits, but ran afoul of accounting rules.

In 2008, Dooley pleaded guilty to a federal charge of lying to the company's auditors. He was sentenced to two years of probation, six months of home confinement, and 500 hours of community service.

While Dooley conceded that he broke the law, he argued that he didn't do so "willfully" and was therefore entitled to compensation under his employment contract with ESI. That contract called for resolving disputes before an arbitrator, and Dooley won his arbitration last December.

ESI appealed the ruling, arguing that the arbitrator's ruling had ignored provisions in Oregon law and that the ruling had "insulted" public policy by awarding severance to an executive convicted of a crime.

In his ruling Tuesday, though, Acosta said that federal law sets narrow grounds for vacating arbitration awards.

"An arbitrator exceeds his powers only when an arbitration award is completely irrational or exhibits a manifest disregard of the law," Acosta wrote.

The judge concluded that the arbitrator in Dooley's case had drawn reasonable conclusions under federal law.

ESI's argument that the arbitrator's ruling is an affront to public policy doesn't hold up, either, Acosta wrote. The U.S. Securities and Exchange Commission was aware Dooley might seek severance and didn't act to stop him, according to the ruling.

Additionally, Acosta wrote that Dooley's severance isn't "extraordinary" under the meaning of established securities law.

ESI took a $1.3 million charge late last year to cover Dooley's severance and the company's legal costs. ESI said today that no executive is available to comment on the court's decision.

Dooley, 57, now lives in Florida. His Portland attorneys say he's not working, due to a medical condition, but volunteers in local schools and with Habitat for Humanity.

"Mr. Dooley and his counsel are pleased with the court's ruling and the detailed written opinion supporting it," they add.

Note: This article has been updated with additional detail about James Dooley.